As if building the world’s tallest building and investing in projects throughout the MENA region wasn’t enough, Dubai-based property giant Emaar is rolling out its presence in the world’s second most populated country.
Through a 2005 joint venture with Indian development company MGF, Emaar-MGF has been involved in multi-billion dollar real estate projects from Delhi in the north to Hyderabad in the south, and plans to build in India the world’s largest mall and a Giorgio Armani luxury hotel.
But Emaar is not the only Gulf developer in the subcontinent seeking a slice of a burgeoning middle class with extra purchasing power. Nakheel, a subsidiary of Dubai World, is hot on Emaar’s heels, inking deals in 2007 worth $25 billion, along with Dubai-developer Damac Properties announcing they were to invest $5 billion in India over the next five years.
Other private Gulf investors are also to sink $5 billion into developments in a sector analysts forecast will surge by 700% in the next decade.
The sudden foray into India by Gulf investors is not confined to the likes of Emaar and Co. seeking to build real estate and malls. With transactions in the market expected to grow from $14 billion to $102 billion in the next 10 years, $150 billion to be spent on infrastructure, and Indian stock markets riding high — Bombay’s bourse rose above 20,000 points for the first time in late October — Gulf investors are scrambling to get in on India’s boom. Bahrain’s TAB Bank now has two funds in Indian bourses worth over $220 million and Dubai’s Abraaj Capital has a $250 million fund with Mumbai’s Sabre Capital.
Other developments are also afoot, with Dubai-based developer ETA Star Properties to develop a $923 million ‘infotech’ park in Chennai, and the Gulf Finance House to back the $395 million Energy City India, cementing Delhi’s energy links with the GCC.
And at the end of the year, RAKEEN, a property arm of the Ras Al-Khaimah government, formed a joint venture with India’s Trimex mineral group to spend $5 billion on developing residential, commercial and office space.
As Mohammed Ali Alabbar, chairman of Emaar Properties, told the press, “India is only an hour away from us, it is our true China and with the size, population, culture, economic policies, and growth that exist in India, it’s a great opportunity.”
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Property and mall developers are riding high on India’s 7% annual economic growth and a middle class that is expected to surge over 10-fold, from 50 to 587 million by 2025, according to a McKinsey Global Institute study, propelling 5% of the population in the middle class bracket to some 40%.
But with an economic boom as well as a rising population — 1.1 billion and growing — property prices are spiking. And the rush to develop real estate in India, as for any emerging market, is also about the scramble for land.
Mumbai is now the second most expensive city globally for office space, with rent rising 55% in the last year, and New Delhi in the eighth slot, up 34.4%. Such rising costs were reflected in a $10 billion Nakheel development last year, with land accounting for some 40% of the price tag. As a result, Emaar-MGF has embarked on a $12 billion pan-India program that will include special economic zones, hospitals, residential units, hotels and malls.
“We have a pan-India presence, and will have a presence in all 22 states through the land we have acquired and are in the process of developing that,” said Anupama Chopra, head of corporate communications at Emaar MGF Land Limited.
In bulging-at-the-seams cities like Bombay with 12.6 million people and Greater Delhi with over 14 million, developers are focusing on the tried-and-tested in the Gulf ‘integrated township’ model of residential and retail space.
“This is something that is prevalent in the rest of the world but not in India,” said Chopra.
Utilizing the same model as in the Gulf, most of Emaar’s architectural designs for Indian projects are the same, “trying to replicate here” what worked in Dubai, said Beedisha Chakrabarti, corporate communications manager at Emaar-MGF. One of the projects, in Gurgaon, a satellite city of Delhi, is to be called Palm Springs.
To raise funds for such projects, Emaar-MGF plans to sell a 10% stake this year through an IPO, which bankers suggest might raise some $1.5 billion. When Nakheel’s joint venture partner DLF listed on the Bombay stock exchange in July, $2.25 billion was raised in India’s biggest IPO, and shares have since gained 30% in the past six months.
Retail dreams
Part of the land Emaar and Co. are investing in land is for the growing retail market, which is expected to grow by 14 times by 2012 and retail chains to expand 25% a year, currently at only 5% of the market. Indicative of growth is the surge from 150,000 square meters of retail space and 30 malls back in 2001 to 2.5 million square meters of space and 230 malls last year. But compared to China, the country has some way to go to match its neighbors superpower retail space growth, which surged to 222 million square meters between 1995 and 2003.
Negating the retail space difference, however, will be Nakheel’s joint venture partner DLF’s 300,000 square meter Mall of India. And not to be outdone, Chakrabarti said Emaar wants to replicate the Dubai Mall in India. “We are looking at doing India’s biggest mall, as we cannot compete with our own product by having the biggest in the world,” she said.
However, at 583,000 square meter the Indian version will out trump Dubai Mall’s retail space of 520,000 square meter.
In India’s current boom climate — the dream of Dubai super-sized — it would therefore not seem overly farfetched to imagine Emaar building India’s tallest building some time soon. But what is more probable is the creation of development icons that have made the Gulf famous: offshore residential island projects, like the World and the Palm. “It’s on the drawing board somewhere but not right now,” said Chopra.
